Lately, clients have been asking me to look at switching their coverage to a different insurance company. The reason? Like many people, their home and auto insurance premiums are going up. As an independent insurance agent, I work with a lot of insurance companies, and unfortunately premiums are increasing everywhere.
I will say, premiums are regulated by each state’s department of insurance. When insurance companies request increases, they do have to substantiate the request. The state will not allow outright price gouging, versus what most people think.
Why Are Home Insurance Rates Rising?
Homeowners insurance is one of the most essential types of coverage. Right now, it may be more important than ever as claims costs continue to rise.
Although the cost of insurance may fluctuate for various reasons each year, the following are some major factors currently influencing home insurance policies across the country:
Trade labor shortages
There is a shortage of tradespeople, and many industries have struggled to attract new workers. This means that there haven’t been enough people to meet construction demands. This can make the cost of rebuilding or repairing homes more expensive. This article goes into why there is a skilled labor shortage in construction.
Increased weather-related losses
The rise in frequent and expensive damages due to weather-related incidents have put more pressure on available resources. As the number of claims and associated costs rise, so too can insurance rates.
High material costs
The cost of building materials increased significantly due to supply chain issues during the COVID-19 pandemic, and prices are only now starting to ease. However, certain materials in parts of the country remain costly, particularly amid current inflation levels.
Low home inventory and high demand
The housing market is driving up the cost and value of homes, making them more expensive to insure. Check out Forbes’ Housing Market Predictions for 2023 to learn more about where the market may be going.
Why Are Auto Insurance Rates Rising?
Seeing the recent increases in auto insurance premiums has been troubling. According to statistics released in May 2023 by the U.S. Department of Labor, auto insurance premiums have increased 17.1% in the previous 12 months. Yikes! Again, while the cost of auto insurance, like home insurance, may change each year for various reasons, there are strong market factors right now that are having a big influence:
Vehicle inventory
While the availability of new cars has rebounded since the COVID-19 pandemic, inventory levels overall are still below average. This includes the prices for used vehicles. As cars remain more costly, insuring them may be more expensive.
Higher repair costs
Inflation, supply chain issues lingering from the pandemic, high demand at auto shops, and a mechanic labor shortage have all contributed to increased repair costs and the related price of auto insurance claims.
Rising medical bills
As health care costs have risen, auto insurance companies must pay more for medical services when there is an auto crash. Consequently, auto insurance premiums have also increased.
Increased claims
Car accidents and thefts have become more common in recent years, leading to more claims being filed against auto policies. As the number of claims rises, so too does the cost of insuring against them.
As an independent insurance agency, we represent many different insurance companies. We are always happy to take a look and see if you can get good coverage for a better value with someone other than your current insurance company. However, keep in mind, there are several factors that affect whether this makes sense. Changing insurance companies too often can cause increased premiums, but we are always here to help you evaluate your insurance options.
We’d love to hear from you – please reach out! We are here to help.
